The Returns to Hedge Fund Activism

The Returns to Hedge Fund Activism

Alon Brav, Wei Jiang, Frank Partnoy, Randall Thomas

Series number :

Serial Number: 
098/2008

Date posted :

March 01 2008

Last revised :

SSRN Share

Keywords

  • hedge fund • 
  • Activism • 
  • governance

Hedge fund activism is a new form of arbitrage. Using a large hand-collected data set from 2001 to 2006 we find that activist hedge funds in the U.S. propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases.

The abnormal stock return upon announcement of activism is approximately seven percent, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism. We also find large positive abnormal return to the self-reported hedge fund activists during our sample period. The abnormal return significantly exceeds the returns to all hedge funds, the returns to equity-oriented hedge funds and is robust to alternative risk adjustments and selection biases.

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Authors

Professor
Real name:
Wei Jiang
Research Member, Board Member
Emory University Goizueta Business School
Professor
Real name:
Randall Thomas
Research Member
Vanderbilt University Law School and Owen School of Management